FTC and 22 States Sue Amazon for Overcharging Advertisers

The Federal Trade Commission (FTC), along with 22 states, has initiated a lawsuit against Amazon regarding its advertising auction practices. Over the past six years, the company allegedly profited substantially by covertly inflating its advertising rates, as stated by the FTC.

The FTC claims that Amazon misled advertisers for years by imposing “hidden” surcharges during its ad auctions. This resulted in advertisers inadvertently overpaying for sponsored product placements and various advertisements on Amazon’s platform. The lawsuit suggests that this deceptive practice was recognized by Amazon employees, even after multiple concerns were raised internally.

According to the lawsuit, “Amazon has been able to successfully impose hidden surcharges on advertisers almost every time a shopper clicks on an advertisement on the Amazon website.” This tactic, which the FTC asserts is still in effect, has proven financially rewarding for the company. The lawsuit posits that this “scheme has likely illegally extracted over 20 billion dollars from its unsuspecting advertising customers.”

While certain details of the lawsuit remain confidential, it references several internal documents where Amazon staff appeared to question the company’s auction pricing strategies. One memo is cited, indicating that while Amazon’s undisclosed reserve prices “increases our short-term revenue,” it could potentially “hurt us in the long run.”

The FTC argues that the overcharging of advertisers ultimately resulted in increased prices for consumers on the platform, adversely affecting American shoppers. Amazon has countered this claim, arguing in a comprehensive statement that the lawsuit “cites no evidence of consumer price increases.” The company described the FTC’s actions as “misguided” and claimed that it “fundamentally misunderstands” the workings of advertising auctions. “After reviewing approximately 1.5 million pages spanning six years, the FTC relies on a limited set of simplified communications to allege a companywide effort to deceive,” the company asserts. “That is clearly false.”